Changan Minsheng APLL Logistics (1292) expects its gross profit margin to remain above the sector average this year even as operating costs keep rising.

The Chongqing-based company is the exclusive strategic logistics service provider to China's largest automotive maker, China Changan Group.

The company transferred its shares from the Growth Enterprise Market to the main board on Thursday.

"Changan Group has released positive signals about the domestic automotive market in the second half. Its production capacity is expected to increase 6-7 percent from 2012,"chairman Zhang Lungang told The Standard.

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Changan Ford - Changan Group's joint venture with US-based Ford and a major profit source - booked 66 percent year-on-year increase in sales to 286,680 units in the first half of this year.

The automotive logistics industry, however, suffered declining service prices, mainly due to rising labor costs. Changan Mingsheng's gross profit margin fell by 2.37 percentage points to 10.45 percent during January to March from a year back.

"Our margin is still above our peers. We will try to maintain it through technology updates and efficient resources management," said Zhang, adding the firm will provide value-added services for better margins.

In the first quarter, the company's net profit hit 40.94 million yuan (HK$51.76 million), up 24.83 percent from a year back.

Looking ahead, Zhang expects growth in China's automotive market to plateau from a high-growth period. "But the growth will still be higher than the domestic economic growth," he said.

In the first six months, passenger car sales hit a record 8.66 million units, making China the largest consumer of automobiles in the world. `Changan Minsheng shares fell 1.33 percent to HK$8.88 last Friday. GRACE CAO